tv Nightly Business Report PBS November 18, 2011 6:30pm-7:00pm EST
>> tom: once again the clock is ticking on capitol hill. this time it's the super- committee under pressure to reach an agreement on cutting the deficit. but there aren't many signs of progress. >> we are painfully, painfully aware of the deadline that is staring us in the face. >> susie: a look at what missing that deadline could mean for the economy and the markets. it's "nightly business report" for friday, november 18. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
this program is made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt >> susie: good evening, everyone. less than a week left for washington's 12-member super committee to find more than a trillion dollars in budget savings. and tom, the six democrats and six republicans appear locked in a philosophical battle over tax increases. >> tom: with no agreement today susie, it really turns up the heat on the panel to find common ground and make some compromises this weekend. here's why:
the supercommittee has until monday to alert the public about any agreement and until wednesday to vote on it. >> susie: the sticking points sound very similar to the summer showdown over the debt ceiling. darren gersh has an update on where negotiations stand. >> reporter: rather than coming together, democrats and republicans on the super committee were taking an even harder stand today. the key issue remains, as it has from the beginning-- taxes. republicans are not willing to bring enough new revenue to the table to convince democrats to stomach deep cuts in spending on popular programs like medicare. >> the great challenge that is before our country today means that all americans, the wealthiest among us, needs to participate. and we are still waiting for a revenue plan from the republicans that meets that test. >> reporter: the best hope now is for the committee to cobble together cuts in farm programs and other spending and do a little deal, reducing the deficit by $60 billion a year. >> maybe get to $600 billion over ten years and then use this
power they have and tell the rest of the committees of congress, okay, we've done half of it, you find the rest of it. >> reporter: but even that will be hard to win over democrats, given the package only includes a few billion dollars in higher taxes. >> i think the american people on its face can tell that that does not meet any standard of fairness, any standard of common sense. >> reporter: republicans offered some new tax revenue, but in a way that locks in an extension of the bush tax cuts or even lower tax rates. but any agreement must be reached in the next few days. >> we are painfully aware of the deadline that is staring us in the face. >> reporter: for now, financial markets show little concern over the gridlock in washington. but it now looks increasingly likely that the super committee will adjourn with no agreement, leaving investors to focus on congress's other unresolved business. if the payroll tax cut expires at the end of the year, that will put a drag on growth. also unresolved-- an increase in
medicare payments to doctors and an extension of emergency unemployment benefits. >> as long as congress avoids a downgrade and as long as they address the fiscal drag for next year, that is the expiration of these stimulus measures, then i think the markets will be fine with that. >> reporter: the supers plan to work over the weekend, but will then have to decide whether a total failure is less of a risk than some sort of compromise. darren gersh, "nightly business report," washington. >> tom: markets ended the day mostly unchanged as investors stayed on the sidelines waiting for politicians in this country and in europe to tackle debt problems. the dow added 25 points, the nasdaq lost nearly 15-1/2 and the s&p 500 lost a fraction. big board volume settled back below a billion shares. while nasdaq volume dropped to one and three quarter billion shares. with the big losses on wednesday and thursday, the down ended the week down nearly 3%. the nasdaq saw four down days,
ending the week off 4%. it was a rocky week for the s&p as well. it was down 3.8% overall. despite the turbulent trading still ahead, our market monitor the conference board's index of leading economic indicators rose more than forecast last month, signaling that the economy is growing slowly. still ahead, our market monitor says once the e.u. debt situation is resolved, the market will again be driven by fundamentals. >> susie: now's the time of year when many americans give thanks. it's also a time when many wall street workers get pink slips. bank of america, j.p. morgan, u.b.s., have recently announced job cuts, joining goldman sachs, credit suisse and others. for those workers who survive, they're expected to see big cuts to their pay. as erika miller explains the
ripple effect is likely to extend well beyond the financial sector. >> reporter: occupy wall street protestors may be happy to hear many big banks are slashing jobs and bonuses. but, as economist beth ann bovino explains, the pain will be felt well beyond the financial sector. >> the impacts will have kind of a flow through or a knock down effect on the overall u.s. economy. for one thing, if people aren't spending-- and high end people certainly spend a lot-- if they aren't spending, that means that retail sales are going to take a hit. it means that people who are working in that store-- you don't need as many as before. >> reporter: mid-to-late november is typically the season for wall street layoffs. firms want to avoid making cuts during the holidays. but eliminating jobs by year-end means those employees are not eligible for bonuses. workers who keep their jobs can expect lower bonuses this year. nicole gelinas of the manhattan institute thinks they'll be down 20% to 40% percent from last year. >> that's because the european
crisis has stalled financial activity all over the west, uncertainty over financial regulation; the dodd frank law going into effect in america, other global regulations affecting wall street. >> reporter: clearly trouble on wall street means trouble for cities like new york. it's estimated that every job lost on wall street leads to an additional two other jobs lost elsewhere in the economy. true, only about one out of every ten jobs in new york city is in the financial sector. but these workers pay as much as 20% of the city's personal income taxes. it's not just the big apple that will be affected. >> there are other areas in the united states that will also be hit: san francisco, one large area that's also in the financial sector. chicago. even phoenix, arizona also has a large financial make-up in terms of the employees that work there. >> reporter: wall street has always had its ups and downs. unfortunately, many analysts think this is more than just a normal, cyclical downturn.
to some, the situation seems worse than aftermath of the financial crisis in 2008. >> it's even more worrisome that it's not the immediate cutting that you saw-- it's more the managers of the business stepping back and saying okay, the emergency is over, let's see what kind of business we can sustain and it's much smaller than what they had three years ago. >> reporter: and that's bad news for wall street and main street alike. erika miller, "nightly business report." >> tom: six weeks to go before the end of the year and tonight's market monitor thinks the stock market will end the year in the green. he's eric ristuben, chief investment strategist at russell investments and he joins us tonight from seattle. eric, welcome back. nice to see you again. >> good to see you, tom. >> tom: you think we're going to ends the year in the green? how much? >> the beginning of the year when we last talked in late january, our price target for the s & p was 1370.
in the summer, in august, we adjusted that down to 1300. it's still the number we're can keeping. we wanted to adjust it down because even though we believe that stocks are good value, we're seeing the kind of volatility created around europe and wemented to reflect that in our price target for the s & p. >> tom: it's still above where we're trading at here on this friday. what's your anticipation for 2012? more of the same with that kind of single-digit returns? >> yes. in terms of equities. we believe we'll see economic growth better than a lot of people feel and we think that will drive corporations to continue to increase earnings. although, as we know, this late in the economic cycle, usually, the rate of growth diminishes pretty significantly and that's what we're seeing but we do expect it to be positive and we expect to see positive returns in 2012 for equities. >> tom: balance that headline risk out of europe, out of the super commit net next week, even out of slower earnings growth, vrgs the business risk, the fundamentals we're seeing from
corporations and will see. >> we saw a very good earnings season. i would characterize third quarter as surprisingly strong earnings season versus what people were beginning to have expectations about. you're seeing earnings being good. balance sheets in corporate america and global corporations in general, the amount of leverage is down. the aim of cash on the books is higher. so, you know, if you expect an economic expansion, u.s. being something in the order of third quarter and fourth quarter of this year being in the 3% range in terms of growth, you expect the emerging markets. >> the developing markets like china to continue to grow at a six-plus percent rate. even if you do get a recession in europe you still have a very strong fundamental support for equities. >> tom: that's the background. in the foreground you're looking at google and technology, the share price trading just below $600 per share. what do you anticipate out of google. >> first of all, google is off
of its highs from the summer pretty significantly. and, again, we're overweight in general in technology. and there's a number of reasons. number one, technology companies actually take advantage of higher growth rates in terms of the economic growth rates and reflect those typically in their earnings. there will be an advantage if we see this pro cyclical market we expect. the other part of google's attractiveness, is that their balance sheets typically carry very high levels of cash with very little leverage. they can withstand a fair amount of financial strain in the system without really having too much stress in their overall business model. >> tom: you also like energy. oit hit just over $100 a barrel. halliburton your choice here. how much of its fate is tied to oil? >> obviously are the fact that oil has rallied from its lows in the midsummer is a positive for halliburton. it's a field services company so
it's not necessarily an oil-integrated company. if you look at field services, oil north of $80 a barrel should provide good support for their services that they provide to larger oil companies. >> tom: finally, let's update the january 28 picks. you like energy back then with apache, the share price down 14%. comcast down six. do you still like these? >> we still own both of them. our over-weight to both of them is lower than we saw in january. we did see pretty good price appreciation in january until late april and they sold off, kind of reflective of the overall concern over europe and the broader economy. >> tom: real quick are the funds have positions in these, correct? >> absolutely. >> tom: our market monitor this friday, eric ristuben, chief investment strat can gist at russell investments. >> it's encouraging to hear eric upbeat on the markets but investment today was much more edgy and that's why we saw stocks flipping between small
gains and small losses, a lot on the worry list-- europe, super committee, you name it. >> tom: the key word there is small. less volatility, a lot less after a chop week, susie. let's go ahead and roll with tonight's market focus. #-r a difficult week for shareholders came to a quiet end today. the major stock indices closed mixed. the dow industrials was the only major index to close in the green, even that was just a fractional gain. this is the past 30 sessions. it has been a choppy november for the index. since the halloween sell-off, the index has been in a 500 point range. leading the dow, hewlett- packard's more than 2.5%. h.p.q. is the dow's best performer this week. boeing also jumped more than 2%. boeing received its biggest commercial order ever-- 230 7-37
planes from the biggest air carrier in indonesia. the drag on the dow came from chevron. c.v.x. dropped more than 2%, falling to a one month low. the company said pirates attacked an oil vessel off the coast of nigeria, kidnapping three people. investors may have been playing some defense and looking for dividends after the volatility this week and ahead of a holiday shortened week next week due to thanksgivings. the utility sector saw the best gains of the day. this utility exchange traded fund added less than a percent. meantime, tech stocks were the weakest, led lower by salesforce.com. the business software firm fell 10%. volume was six times normal. shares remain just above their low from early october. investors worried about its outlook coming in below some estimates. another tech stock moving today off of earnings last night was semiconductor maker marvell technology. shares jumped 6.5% thanks to its outlook, which was more
optimistic than analysts predicted. marvell is among the tech companies impacted by flooding in thailand impacting some manufacturers. wireless technology may be hot, but 4-g wireless broadband services provider clear-wire continues struggling. shares lost a fifth of their value. the firm has a $237 million debt payment due on december first. it has just under $700 million in cash. the c.e.o. said the company is evaluating "everything in terms of our decision of where we're going." in commodities, the worries this week out of europe did not help gold prices. gold closed up $5 an ounce today but gold saw its biggest weekly price drop since
september...falling 3.% from last friday. finally, a couple of the initial public stock offerings this week. local consumer review website angie's list fell almost 3% today. it's initial price was $13. and former general motors auto parts company delphi fell 1.5% today. it debuted at $22 this week. and that's tonight's market focus. >> susie: don't expect amazon's kindle fire to heat up the company's balance sheet.
the tablet costs nearly $202 to make. by selling it for $199, amazon basically breaks even on each sale. the company is expected to sell up to six million devices before the year is done. amazon hopes its lower price will help make it more attractive than apple's ipad 2, which has a starting price of $499. last month, amazon warned it could lose money in the fourth quarter as it spends heavily on the fire and other projects that may not generate immediate returns. here's what we're watching for next week: our friday market monitor guest is bernie schaeffer, chairman of schaeffer's investment research. we'll see the october reports on existing home sales and personal income. on monday, hewlett packard reports quarterly results. we'll find out if new chief executive meg whitman is turning the tech firm around after a year of instability. 1,000 detroit city workers will be laid off between now and the end of february.
that's about 9% of the city's workforce. the city is scrambling to trim costs as it looks to avoid impending insolvency. the job cuts are expected to save $14 million this fiscal year. a report commissioned by the mayor's office says without drastic reforms detroit will run out of cash by april 2012. >> the food and drug administration ruled that avastin should no longer be used to treat breast cancer. avastin will still be on the market because it's used to treat other forms of cancer. today's ruling is expected to influence insurance coverage. a monthly supply can cost more than $8,000. medicare said it will cover it while it evaluates whether a change is needed.
>> tom: four colleges in northeast ohio are the latest to host a new effort to inspire student entrepreneurs. the launch pad program originated and was developed at the university of miami to help students refine their business ideas, working toward building those ideas into businesses and creating jobs. we spoke with steve schwarzman, chairman and c.e.o. of the blackstone group. his company's charitable foundation helped fund the expansion of the entrepreneurial program.
>> entrepreneurship is how we start businesses. it's how we create jobs. almost all of the new jobs over the last decade, decade and a half, can be traced more or less to smaller businesses and start-ups and development. now, without the constant creation of new companies, you don't have the new job growth. >> tom: blackstone certainly started as an entrepreneurial endeavor. it has hundreds of thousands of plays with its partner companies. what's changed in the entrepreneurial environment today versus trix years ago when you began your firm. >> the overall environment isn't as positive. un, when we started our firm, it sort of felt like almost anything was possible. we really good economic growth, but in the 1980s, but remember the 1970s had virtually no growth. it was just stagflation for 10
years. the stock market didn't go up at all net for 10 years. so you can have these bad periods. the environment we're in now is a lot tougher. you've got all kinds of regulatory constraints that we didn't have at that time. and the overall growth picture is much more reduced, which creates a tougher time for any entrepreneur. >> tom: do you feel a responsibilitior an obligation to assist entrepreneurs and that entrepreneurial spirit? >> absolutely. and in fact, i personally feel a greater obligation than that. i really want to get the united states back on a winning track. it's important for not just the people who are working now but for their children, and other generations. when you hear people say that, it sounds corny. bit it's actually true.
>> tom: that's why whereyou've directed some of your charitable contributions to entrepreneurship, is in higher education, to colleges in the detroit area announced this week, four colleges in northeastern ohio will be seeded with money from the blackstone charitable foundation to engage in entrepreneurial activity with the student body of those six schools. why target those geographic areas? >> it's interesting. there are few reasons for targeting different things. entrepreneurship actually is the lowest in younger people. youth unemployment is the highest. entrepreneurship is the lowest. so, you know, we've decided to address these problems by seeing if we can help educate, you know, students at major universities, create programs where they can look at starting new businesses, set up an
infrastructure of experienced entrepreneurs to look at these kinds of ideas, and then put them into action, help those students who are then to be graduates create new businesses, raise capital, coach people, mentor them so they don't make the kind of mistakes that first-time people make, which are normal. no reason to reinvent the wheel. >> tom: what's your hope for the charitable giving that you've designated in the industrial north to spear on-- to spur on entrepreneurship? >> we've taken our foundation at blackstone with $50 million, and our objective is to create 300,000 jobs off of that $50 million. >> tom: steve schwarzman, chairman and se of blackstone, thank you for why you were time.
>> thank you. >> susie: you know you can keep >> susie: you can keep up with n.b.r. anytime. we're online at nbr on pbs.org. there you'll find all the market data from the program. and you can follow us on twitter @bizrpt or my personal feed @sgharibnbr. we're also on facebook at bizrpt. the holiday season is upon us. it's an opportunity to get your children and grandchildren in the spirit of giving. tonight's "kids & cash" has some tips on getting young people aware of how and why to give to charity. here's janet bodnar editor at kiplinger's personal finance. >> the best way to teach your kids the joy of giving this holiday season is to lead by example. don't just send a check to your favorite charity. talk with your children about what you're doing and why you picked that cause. some families tithe or require their kids to set aside part of their allowance for giving. less-formal arrangements also work. for example, your children can collect spare change in a
special container or bank. when the jar is full, they can donate the money to a charity they choose. make it as hands on as possible. the holidays offer plenty of opportunities. have your kids help you buy a gift for a local toy drive. better still, have them buy it with their own money. build on holiday lessons throughout the year. ask your children to help you pack up clothes they've outgrown or toys they no longer play with. and bring the kids along when you give away the old items so they can see how much they're appreciated. remember that charity involves gifts of time as well as money. take the kids with you to help an elderly neighbor shovel snow this winter. they'll remember the experience. i'm janet bodnar. >> tom: that's "nightly business report" for friday, november 18. i'm tom hudson. goodnight, everyone and have a great weekend, susie. >> susie: good night, tom. i'm susie gharib goodnight, everyone. we hope to see all of you again next week. "nightly business report" is made possible by: